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Asia ETF Roundup (Market) – August 2017

India and Indonesia cut rates. Chinese Yuan up 2% in August.

 

Jackie Choy 07/09/17

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – August 2017”.                                                                                                                         

Major Markets Performance
Geopolitical tensions came to the fore once again. During the month, North Korea threatened it has formed plans to fire missiles into waters near the U.S. territory of Guam and towards the end of the month, it also launched a missile over Japan. The U.S.’s S&P 500 ended the month with only a small gain of 0.1%. Meanwhile, Korea’s KOSPI dropped by 1.6%. On the other hand, China’s equity markets continued their strong momentum from previous months, advancing another 2-4% (HSCEI +4.3%; CSI 300 +2.3%; Shanghai Composite +2.7%). Meanwhile, the performance of the emerging/frontier markets was mixed. The Brazilian stocks climbed up another 6.0% after rocketing 10.8% in July, while shares in Pakistan lost 14.0% (measured by the respective MSCI indices in U.S. dollar terms).

In the currency space, the ICE Spot Index fell slightly by 0.2% in August, putting its year-to-date decline at 9.3%. Other currencies had mixed performances against the greenback but we saw the Chinese yuan and euro further strengthened, gaining another 2.0% and 0.8%, respectively, putting their year-to-date gains against the U.S. dollar at 5.3% and 12.7%, respectively.

Under the backdrop of geopolitical tensions, precious metal prices rallied against the U.S. dollar. Gold, silver and platinum gained 3.5% to 5.1% in August.

Economic and Market News

FOMC Minutes Did Not Show Timeline for Next Rate Hike; India and Indonesia Cut Rates by 25bps

  • FOMC Minutes Did Not Show Timeline for Next Rate Hike - On 16 August 2017, the Fed’s Federal Open Market Committee released minutes of the July meeting. The minutes did not show the timeline for the next rate hike and stated that “some participants expressed concern about the recent decline in inflation…. They observed that the Committee could afford to be patient under current circumstances in deciding when to increase the federal funds rate further”.
  • India Cuts Rates by 25bps – On 2 August 2017, the central bank of Indialowered policy repo rate by 25bps to 6%. The bank stated that the rate cut decision is in agreement with the objective of achieving medium-term target CPI of 4% (within a band of +/-2%) while supporting growth.
  • Indonesia Cuts Rates by 25bps – On 22 August 2017, the central bank of Indonesia unexpectedly reduced interest rates by 25bps putting the BI 7-day reserve repo rate to 4.5%. The bank expects the policy rate easing to reinforce intermediation in the banking sector, to strengthen financial system stability as well as support higher economic growth. 

 

Chinese Economic Data: Inflation rate fell slightly to 1.4% in July; Caixin/Markit PMI Rises to 51.6, Official PMI Registers at 51.7

  • China’s inflation rate fell slightly by 0.1% compared with the previous month, registering at 1.4% in July.
  • China’s official PMI reading for August 2017 registered at 51.7. This compares with July's reading of 51.4. Meanwhile, the Caixin/Markit Purchasing Managers' Index also rose in August, registering at 51.6, higher than July's 51.1.
About Author Jackie Choy

Jackie Choy  

is the director of ETF Research for Morningstar Investment Management Asia